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Altice lines up $185bn pitch for cable group Charter

Acquisitive European group could be set for latest round of US media consolidation

Wed, Aug 9, 2017, 19:55

French telecom and Media group Altice founder Patrick Drahi. The firm is exploring a bid for Charter Communications, the second-largest US cable operator and the owner of assets formerly held by Time Warner Cable.

Altice, the deal-hungry cable and telecoms group controlled by Franco-Israeli billionaire Patrick Drahi, is lining up a potential $185 billion (€157 billion) bid for Charter Communications, the second-largest US cable company with more than 26 million subscribers.

Interest in a deal by Mr Drahi’s Altice, which has grown ferociously through debt-laden acquisitions in recent years in France, Portugal and the US, is the latest in a series of consolidation moves among US telecom, cable and media providers.

It pits Mr Drahi against SoftBank’s Masayoshi Son in a battle for the hand of Charter, in which billionaire John Malone owns a 21 per cent stake.

Altice has not formally made an approach and may not proceed, according to multiple people close to the Luxembourg-based, Netherlands-listed group. One complication will be whether the group and its advisers can amass the huge amount of debt financing needed to support a bid for its much larger rival.

These people also cautioned that Charter, which beat Altice in a battle to acquire Time Warner Cable in a $78.7 billion deal that closed just last year, has not expressed interest in a possible combination.

Altice only recently listed its US cable subsidiary in New York to position itself for more dealmaking in America, but has managed to win support from shareholders thanks to the speed with which it has delivered operational improvement at Cablevision and Suddenlink. It acquired those regional operators for $17.7 billion and $9.1 billion in the past two years and then bundled them into Altice USA.

Shares in Altice USA, which has a market value of $23 billion and a net debt of $22.6 billion, were flat following the news of a potential bid, which was first reported by CNBC. However, shares in its parent company Altice NV dropped 5.2 per cent to €19.65 in Amsterdam trading.

Charter has emerged as an attractive target for smaller US telecoms and cable providers because of its footprint, which extends to 41 states and puts its behind only Comcast for subscribers. Earlier this year Charter and Verizon, the largest US wireless telecoms operator, explored a potential combination but the two companies decided not to pursue a deal.

Company shares

Shares in the company have leapt in recent weeks as it has become the focal point of interest, particularly from Japan’s SoftBank, which is searching for a partner to connect with Sprint, the fourth-largest US mobile phone operator which it controls.

Charter rose 3.4 per cent to $402.86 just after midday in New York to give it a market value of roughly $121 billion. The company has net debt of $62.5 billion, meaning a deal including debt could easily surpass an enterprise value of more than $185 billion.

Charter has been cool on interest from Mr Son, the billionaire founder behind SoftBank, saying it had no interest in acquiring Sprint. However, it has not commented on potential takeover interest from either SoftBank or Altice.

Analysts said that Mr Malone was another factor in a potential takeover attempt of Charter. Mr Malone is the largest shareholder in Charter and has significant sway over the industry given his range of holdings that span US and international cable and media.

Dexter Goei, a former Morgan Stanley banker and chief executive of Altice USA, has not been shy about the French group’s ambition to grow its US footprint through acquisitions.

At the time of the listing of Altice USA in June, Mr Goei said the IPO was “all about being ready if there is an opportunity to partner up with someone . . . to put ourselves on the map and to have a currency” for future acquisitions.

Charter and Altice have both expanded by rolling up regional operators. Others are looking to gain control of content. AT&T’s $84.5 billion bid for Time Warner, the owner of HBO and Warner Bros, is being reviewed by regulators and is expected to close at the end of the year, creating the world’s largest vertically integrated content and distribution company. Verizon has snapped up Yahoo and AOL. – Copyright The Financial Times Limited 2017